Shared Ownership: Stamp Duty Mind Melt!

Lilstu

Market value is 360,000 - it’s being offered by the housing association at 270K for my 75% share. As I understand it I can sell it as a non shared ownership as well as a shared ownership after the 4 week window has lapsed (I can see an apartment downstairs has an estate agent advertising both the shared ownership and fixed amount separately for the full market value)

I bought it for £340,000 (full market value). I initially bought a 40% share which was £136,000.

Staircased from 40% to 60% - market value at the time of staircasing 350,000
Staircased from 60% to 75% - market value at the time of staircasing 350,000

AdrianC

I think you're misunderstanding what and how you paid.

When you bought the first 40%, you had the choice to pay SDLT on that 40% or on the full 100%. You chose the 40%, and paid that. You're seeing that as having "deferred" the other 60%...

Because you chose to only pay the 40%, when you bought the next 20% (taking you to 60%), you paid SDLT on that 20% (so you'd now paid SDLT on 60%). If you'd originally paid 100%, you wouldn't have paid anything more.

Because you chose to only pay the 40% originally, when you bought the next 15% (taking you to 75%), you paid SDLT on that 20% (so you'd now paid SDLT on 75%). If you'd originally paid 100%, you wouldn't have paid anything more.

If you'd bought the remaining 25%, then because you chose to only pay the 40% originally, when you bought the final 25% (taking you to 100%), you'd have paid SDLT on that 25% (so you'd now paid SDLT on 100%). If you'd originally paid 100%, you wouldn't have paid anything more.

So why pay up front if you're planning on staircasing to 100%? Simply because the staging is of the value at the time - so you'd have paid fewer £ to pay 100% SDLT up-front, if the value of the property had grown. As it happens, yours hasn't grown much over the time, so you definitely made the right choice.

You never owe the final 25% SDLT, because you're not buying the final 25% of the property.

SDLT_Geek

If you can sell the property as a shared ownership without staircasing beyond your existing 75% then you will pay no more SDLT. The buyers will have to consider their own SDLT position.

If you have to staircase first (on a back to back basis) then as acquiring the remaining 25% takes you over 80% you will have to pay some SDLT. I make this £1,918 on the following basis.

In 2016 you initially paid £136,000 for a 40% share.
In 2017 you paid £70,000 for a 20% share.
In 2017 you paid £52,500 for a 15% share.
In 2019 you pay £90,000 for the last 25% share to get you to 100%.

That totals £348,500. SDLT on an acquisition of a residential property at standard current rates for £348,500 would be £7,425 (calculated at slice rates, 0% on the first £125,000, 2% up to £250,000, 5% on the rest).

But you pay SDLT of a fraction of the £7,425. The fraction is 90,000 / 348,500. This gives £1,918 SDLT for you to pay on staircasing to 100%.

I note that this is different from the £4,413 figure you were told and the £1,875 from the broker!

The buyer has to consider their own SDLT on their purchase.

SDLT_Geek

AdrianC wrote: »

I think you're misunderstanding what and how you paid.

When you bought the first 40%, you had the choice to pay SDLT on that 40% or on the full 100%. You chose the 40%, and paid that. You're seeing that as having "deferred" the other 60%...

Because you chose to only pay the 40%, when you bought the next 20% (taking you to 60%), you paid SDLT on that 20% (so you'd now paid SDLT on 60%). If you'd originally paid 100%, you wouldn't have paid anything more.

Because you chose to only pay the 40% originally, when you bought the next 15% (taking you to 75%), you paid SDLT on that 20% (so you'd now paid SDLT on 75%). If you'd originally paid 100%, you wouldn't have paid anything more.

If you'd bought the remaining 25%, then because you chose to only pay the 40% originally, when you bought the final 25% (taking you to 100%), you'd have paid SDLT on that 25% (so you'd now paid SDLT on 100%). If you'd originally paid 100%, you wouldn't have paid anything more.

So why pay up front if you're planning on staircasing to 100%? Simply because the staging is of the value at the time - so you'd have paid fewer £ to pay 100% SDLT up-front, if the value of the property had grown. As it happens, yours hasn't grown much over the time, so you definitely made the right choice.

You never owe the final 25% SDLT, because you're not buying the final 25% of the property.

I disagree with all of this apart from the first three sentences!

SDLT_Geek

OP, please do let us know how this works out for you and whether you are able to sell at 75% staircased or whether you have to staircase to 100% "back to back" with a sale.

Lilstu

Yes of course. My housing association has until the 4th February to sell my 75% share.

After the 4th February they are going to outline my other options selling with estate agents. I believe one of those options will be sell 100% as a back to back transaction which will inevitably involve me paying the stamp duty for the back to back transaction as well as the linked transactions of 60% and 75%.

A benefit of the housing association selling it would be I wouldn’t have to pay any further stamp duty I guess. Let’s see what they say.....

00ec25

Lilstu wrote: »

as well as the linked transactions of 60% and 75%

wrong
they will not and cannot be linked transactions since they relate to purchases under 80% and you made your first purchase in 2016 which is obviously well after the cutoff date 12 March 2008 as explained in the guide which would have made the first transaction (and only the first transaction) linked had it been before 12 March 08.

the correct position, if you back to back, is shown in the calculation done by SDLTgeek, and is also illustrated in example 2 of the guide.

SDLT_Geek

Lilstu wrote: »

Yes of course. My housing association has until the 4th February to sell my 75% share.

After the 4th February they are going to outline my other options selling with estate agents. I believe one of those options will be sell 100% as a back to back transaction which will inevitably involve me paying the stamp duty for the back to back transaction as well as the linked transactions of 60% and 75%.

A benefit of the housing association selling it would be I wouldn’t have to pay any further stamp duty I guess. Let’s see what they say.....

This all sounds very sensible. I would be interested to hear what develops next week and whether the RSL can find a buyer for your lease as it is (staircased to 75%), or whether you will do a back to back transaction having staircased to 100%.

Lilstu

Hey Everyone,

So - An update on my situation. The 4 weeks with the housing association lapsed. I advertised my property on the open market and got an offer 4 days later by advertising it at 100% which as I understand it is referred to as staircase and simultaneous sale.

I need to stress that when I staircased from 40% to 60% and from 60% to 75% - absolutely no stamp duty was paid. So I still need to figure out what my stamp duty bill is going to be now that I’m doing the staircase and simultaneous sale.

My friend has read this thread and is concerned I haven’t made it clear that I have only paid that tiny amount of stamp duty when I first first bought the property and doesn’t want me to end up with a whopping big bill that I wasn’t expecting.

Lilstu

@SDLTGeek - For clarity, the offer is for 360K for the 100%.

You kindly mentioned in one of the above threads that you could assist with the calculation. I would really appreciate any assistance so I know what to expect.